EMPLOYMENT AGREEMENT
THIS AGREEMENT (this "Agreement") is executed and effective as of July
15, 1996 (the "Effective Date"), by and between 1+ USA, INC., a Delaware
corporation (the "Company"), and XXX X. XXXXXXXXX ("Executive").
R E C I T A L S:
A. The Company has been organized to consolidate two or more companies
engaged in the telecommunications business ("Consolidating Transaction") with a
view to effecting an underwritten public offering ("IPO") of the resultant
corporation's equity securities in 1997.
B. Executive is recognized as having experience in the management,
consolidation and operation of companies that are engaged in the
telecommunications business.
C. The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to cause
the Company to enter into this Agreement.
D. Executive desires to enter into this Agreement.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and Executive hereby agree as follows:
ARTICLE I
EMPLOYMENT, REPORTING, TERM AND DUTIES
1.1 Employment. On the terms and subject to the conditions of this
Agreement, the Company hereby employs and engages the services of Executive to
serve as, and Executive agrees to diligently and competently serve as and
perform the functions of, Chairman, President and Chief Executive Officer (the
"Office") of the Company for the term and for the compensation and benefits
stated herein.
1.2 Term. The term of employment under this Agreement shall commence
on the Effective Date and shall end on the first to occur of the events set
forth in Section 4.1(a), (b), and (c) (the "Term").
1.3 Major Responsibilities; Authority. Executive shall have the
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities usually associated with the Office of
corporations having assets similar in nature and value to the assets of the
Company and business similar to the business of the Company.
1.4 Extent of Service. During the Term, and excluding any periods of
vacation and sick leave to which Executive is entitled, Executive agrees to
devote reasonable time and energies to the business of the Company and shall
not, during the Term, be engaged in any business activity which would interfere
or prevent Executive from carrying out his duties under this Agreement;
provided, however, that this Section 1.4 shall not be construed as preventing
Executive from (a) continuing to pursue consolidating transactions through
Consolidation Partners Founding Fund, L.L.C. as contemplated by that entity's
Confidential Offering Memorandum dated June 20, 1996, as amended, (b) managing
the business affairs of Consolidation Partners, L.L.C., or (c) otherwise
investing and managing his personal assets.
1.5 Location. Executive shall not be required to move from
Executive's home in Houston, Xxxxxx County, Texas.
ARTICLE II
COMPENSATION AND RELATED ITEMS
2.1 Compensation. As compensation and consideration for the services
to be rendered by Executive under this Agreement and for the performance by
Executive of the usual obligations of such employment, the Company agrees to
pay Executive, and Executive agrees to accept, the following compensation and
benefits during the Term:
(a) Salary. Executive shall be paid a minimum annual salary
of $300,000. Except as otherwise provided herein, the minimum salary
in effect for any period shall be payable in twice monthly payments.
Any earnings over the minimum salary in effect during any period shall
not be applied to the minimum salary for any subsequent period. If
this Agreement terminates on a date other than the last day of any
week, Executive shall be paid for the week that includes the date of
such termination a pro rata portion of the minimum salary then in
effect for such week in the ratio that the number of days of
employment during such week bears to the total number of business days
in such week.
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(b) Recurring Bonus Potential. In addition to the minimum
salary provided for in Section 2.1(a) hereof, Executive shall be
entitled to receive in respect of each year during the Term a bonus in
an amount not to exceed 100% of the annual salary actually paid or
accrued to the account of Executive in respect of the year to which
such bonus relates all as may be determined by the Board (or the
appropriate committee thereof) ("Bonus").
(c) Special IPO Bonus: In the event the Company completes the
IPO prior to October 31, 1997, the Company shall pay Executive a
special one time bonus of $300,000 within two weeks after the closing
of the IPO.
(d) Additional Compensation. In addition to the minimum
salary and Bonus provided for in Section 2.1(a) and (b),
respectively, Executive and/or Executive's family, as the case may
be, shall be entitled to:
(i) participate in, and shall receive all benefits
under:
(A) any and all welfare benefit and similar
employee benefit plans, programs, arrangements, or
policies that are generally made available by the
Company and its affiliates (as defined in Section
4.10(l)) now or at any time in the future to other
key executive officers or retired key executive
officers, including, but not limited to, any
hospitalization, medical, prescription, dental,
disability, salary continuance, individual life
insurance, executive life insurance, group life
insurance, accidental death insurance, and travel
accident insurance plans, programs, arrangements,
and policies; and
(B) any and all bonus, incentive, savings,
retirement, profit sharing, pension, and stock
option plans, programs, arrangements, and policies
that are generally made available by the Company and
its affiliates now or at any time in the future to
other key executive officers; and
(ii) annual vacations and sick leave in accordance
with the vacation and sick leave policies of the Company and
its affiliates as are now or at any time in the future in
effect with respect to other key executive officers, during
which time of such vacations and sick leave Executive's
compensation shall be paid in full; and
(iii) fringe benefits in accordance with the fringe
benefit policies of the Company and its affiliates as are now
or at any time in the future in effect with respect to other
key executive officers.
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2.2 Expenses. The Company agrees that, during the Term, Executive
shall be allowed reasonable and necessary business expenses in connection with
the performance of his duties hereunder within guidelines established by the
Board in effect at any time with respect to key executives ("Business
Expenses"), including, but not limited to, reasonable and necessary expenses
for food, travel, lodging, entertainment and other items in the promotion of
Company's business within such guidelines. Company will promptly reimburse
Executive for all Business Expenses incurred by Executive upon Executive's
presentation to the Company of an itemized account thereof, together with
receipts, vouchers, or other supporting documentation. After termination or
expiration of this Agreement, however such termination or expiration may come
about, Executive shall have ninety (90) days after the date of such termination
or expiration to submit Business Expenses incurred during the Term hereof to
the Company for reimbursement. During the Term, the Company agrees to provide
Executive with (a) a $500 per month automobile allowance and (b) financial
planning and income tax preparation services provided by the Company's auditors
having an aggregate fair market value of not more than $5,000 per year. The
Company acknowledges that as part of Executive's community involvement,
Executive's secretary may devote up to 25% of her time during normal business
hours to the performance of work for non-profit organizations designated by
Executive.
2.3 Working Facilities. Executive shall be furnished with an office of
a size and with such furnishings and appointments, administrative staff,
secretarial and other assistants, stenographic help, and such other facilities
and services as are suitable to Executive's position and adequate for the
performance of Executive's duties.
2.4 Stock Options. Prior to the consummation of the IPO, the Board
shall grant to Executive options to purchase 1,000,000 shares of Common Stock,
no par value, of the Company ("Common Stock"). The exercise price of the shares
of Common Stock subject to the foregoing options ("Options") shall be equal to
$2.50 per share. The Options shall have a term of ten years and shall become
exercisable in annual increments equal to 331/3% of the total initial grant
upon each anniversary date of the grant. Accordingly, the Options shall become
fully vested on the third anniversary date of the grant. Notwithstanding the
foregoing, the Options shall become immediately and fully vested upon the
occurrence of a Change of Control of the Company.
2.5 Term Life Insurance. To the extent available on a commercially
reasonable basis, the Company shall secure, at its sole cost and expense, a
term life insurance policy on the life of Executive in the amount of
$1,000,000. During the term, the premiums on the foregoing policy shall be paid
by the Company and the beneficiary of such policy shall be Executive's spouse,
or such other person or persons as Executive shall designate in writing.
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ARTICLE III
EXCULPATION
The Company agrees that Executive will not be liable for any losses,
expenses, costs or damages caused by or resulting from the recommendations,
suggestions, actions, errors, omissions or mistakes of Executive undertaken or
proposed by Executive if Executive acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company. Executive's rights under this Article III shall not be deemed
exclusive of, but shall be cumulative with, any and all other rights
(including, but not limited to, rights of indemnification and advancement of
expenses) to which Executive may now or at any time in the future be entitled
under applicable law, the Company's Certificate of Incorporation, the Company's
bylaws, any agreement (including, but not limited to, this Agreement), any vote
of stockholders, any resolution of directors, or otherwise.
ARTICLE IV
TERMINATION
4.1 Termination of Agreement. Except as may otherwise be provided
herein, this Agreement shall terminate upon the first to occur of:
(a) Thirty (30) days after written notice of termination is
given by either party to the other; or
(b) Executive's death or, at the Company's option, upon
Executive's becoming Disabled (as defined in Section 4.8 hereof); or
(c) July 15, 2001; provided, however, that such date shall be
automatically extended on a year to year basis, unless on or before
June 30, 2001, or June 30 of any subsequent year, either Executive or
the Company gives the other party notice that the expiration date
therein effect will not be extended, in which event the expiration
date will be the next July 15.
Any notice of termination given by Executive to the Company under Section
4.1(a) above shall specify whether such termination is made with or without
Good Reason (as defined in Section 4.4 hereof) or Good Reason-Change in Control
(as defined in Section 4.5 hereof). Any notice of termination given by the
Company to Executive under Section 4.1(a) above shall specify whether such
termination is with or without Cause (as defined in Section 4.3 hereof).
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4.2 Obligations of the Company Upon Termination.
(a) Cause; Other than for Good Reason and Other than for Good
Reason-Change in Control. If the Company terminates this Agreement
with Cause pursuant to Section 4.1(a) hereof, or if Executive
terminates this Agreement without Good Reason or without Good
Reason-Change in Control pursuant to Section 4.1(a) hereof, or if this
Agreement terminates pursuant to Section 4.1(c) hereof, this Agreement
shall terminte without further obligations to Executive, other than
those obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not limited
to:
(i) to the extent not theretofore paid, Executive's
minimum salary at the annual rate in effect at the time of
such termination through the date of termination; and
(ii) in the case of compensation previously deferred
by Executive, all amounts previously deferred (together with
any accrued interest thereon) and not yet paid by the Company
and any accrued vacation pay not yet paid by the Company; and
(iii) all other amounts or benefits owing or accrued
to, vested in, or earned by Executive through the date of
termination under the then existing or applicable plans,
programs, arrangements, and policies of the Company and its
affiliates, including, but not limited to, any such plans,
programs, arrangements or policies described in Section
2.1(d) hereof;
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termintion, including, but not limited
to, such amounts and benefits specified in clauses (i), (ii), and
(iii) of this sentence, being hereinafter collectively referred to as
the "Accrued Obligations." The aggregate amount of such obligations
owing or accrued to, vested in, or earned by Executive through the
date of termination, including, but not limited to, the Accrued
Obligations, shall be paid by the Company to Executive in cash in one
lump sum within thirty (30) days after the date of termination.
(b) Good Reason; Other than for Cause Before a Change in
Control. If Executive terminates this Agreement with Good Reason
pursuant to Section 4.1(a) hereof, or if the Company terminates this
Agreement without Cause before the occurrence of a Change in Control
pursuant to Section 4.1(a) hereof:
(i) the Company shall pay to Executive cash in one
lump sum within thirty (30) days after the date of termintion
the aggregate of the following amounts:
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(A) to the extent not theretofore paid,
Executive's minimum salary at the annual rate in
effect at the time of such termination (but prior to
giving effect to any reduction therein which
precipitated such termination) through the date of
termination; and
(B) in the case of compensation previously
deferred by Executive, all amounts previously
deferred (together with any accrued interest
thereon) and not yet paid by the Company, and any
accrued vacation pay not yet paid by the Company;
and
(C) all other amounts or benefits owing or
accrued to, vested in, or earned by Executive
through the date of termination under the then
existing or applicable plans, programs,
arrangements, and policies of the Company and its
affiliates, including, but not limited to, any such
plans, programs, arrangements or policies described
in Section 2.1(d) hereof; and
(D) any and all other Accrued Obligations
not otherwise described in Clause (A), (B) or (C)
of this Section 4.2(b)(i); and
(ii) the Company shall pay to Executive his minimum
salary at the annual rate in effect at the time of such
termination (but prior to giving effect to any reduction
therein which precipitated such termination) for the period
commencing on the date after the date of termination and
ending 24 months thereafter (such minimum salary to be paid
in accordance with the second sentence of Section 2.1(a)).
(c) Good Reason-Change in Control; Other than for Cause On or
After a Change in Control. If Executive terminates this Agreement with
Good Reason-Change in Control pursuant to Section 4.1(a) hereof, or if
the Company terminates this Agreement without Cause on or after the
occurrence of a Change in Control pursuant to Section 4.1(a) hereof:
(i) the Company shall pay to Executive cash in one
lump sum within thirty (30) days after the date of
termination the aggregate of the following amounts:
(A) to the extent not theretofore paid,
Executive's minimum salary at the annual rate in
effect at the time of such termination (but prior to
giving effect to any reduction therein which
precipitated such termination) through the date of
termination; and
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(B) in the case of compensation previously
deferred by Executive, all amounts previously
deferred (together with any accrued interest
thereon) and not yet paid by the Company, and any
accrued vacation pay not yet paid by the Company;
and
(C) all other amounts or benefits owing or
accrued to, vested in, or earned by Executive
through the date of termintion under the then
existing or applicable plans, programs,
arrangements, and policies of the Company and its
affiliates including, but not limited to, any such
plans, programs, arrangements, or policies described
in Section 2.1(d) hereof; and
(D) any and all other Accrued Obligations
not otherwise described in clause (A), (B), or (C)
of this Section 4.2(c)(i); and
(ii) the Company shall pay to Executive his minimum
salary at the annual rate in effect at the time of such
termination (but prior to giving effect to any reduction
therein which precipitated such termination) for the period
commencing on the date after the date of termination and
ending 36 months thereafter (such minimum salary to be paid
in accordance with the second sentence of Section 2.1(a)).
(d) Death. If Executive's employment is terminated under
Section 4.1(b) hereof by reason of Executive's death, the Company
shall pay to Executive's legal representatives cash in one lump sum
within thirty (30) days after the date of Executive's death the full
amount of the obligations owing or accrued to, vested in, or earned by
Executive through the date of Executive's death, including, but not
limited to, the Accrued Obligations. Anything in this Agreement to the
contrary notwithstanding, Executive's family shall be entitled to
receive benefits provided by the Company and any of its affiliates to
surviving families under the then existing or applicable plans,
programs, or arrangements and policies of the Company and its
affiliates.
(e) Disability. If Executive's employment is terminated
under Section 4.1(b) hereof by reason of Executive becoming Disabled:
(i) the Company shall pay to Executive cash in one
lump sum within thirty (30) days after the date of
termination the full amount of the obligations owing or
accrued to, vested in, or earned by Executive through the
date of termination, including, but not limited to, the
Accrued Obligations; and
(ii) the Company shall pay to Executive
seventy-five percent (75%) of Executive's minimum salary at
the annual rate in effect at the time of such
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termination for the period commencing on the date after the
date of termination and ending on the first to occur of (A)
July 15, 2001 or (B) the July 15 next occurring after July
15, 2001 (such minimum salary to be paid in accordance with
the second sentence of Section 2.1(a)), reduced by the actual
amount of benefits paid to Executive during such period under
any disability insurance policy maintained by the Company for
Executive.
4.3 Cause. As used in this Agreement, the term "Cause" means the gross
or willful neglect by Executive of his duties as an employee, officer or
director of the Company which continues for more than thirty (30) days after
written notice from the Board of Directors of the Company, acting pursuant to a
resolution adopted by at least 60% of its members, to Executive specifically
identifying the gross or willful negligence of Executive and directing
Executive to discontinue same.
4.4 Good Reason. As used in this Agreement, the term "Good Reason"
means the occurrence of any of the following:
(a) a breach of any material provision of this Agreement by
the Company (other than any breach described in clause (b) or (c) of
this sentence), which is not cured within thirty (30) days after
written notice from Executive to the Company specifically identifying
such breach; or
(b) any removal of Executive, without Cause, from the
position of the Office during the Term; or
(c) Executive is in any manner (other than the manner
described in clause (b) of this sentence) relieved of his
responsibilities under this Agreement, without Cause, during the Term.
Notwithstanding anything contained in the immediately preceding sentence to the
contrary, the term "Good Reason" shall not include any breach of any provision
of this Agreement (including, but not limited to, any breach described in
clause (b) or (c) of the immediately preceding sentence) that occurs after the
occurrence of a Change in Control.
4.5 Good Reason-Change in Control. As used in this Agreement, the term
"Good Reason-Change in Control" means after the occurrence of a Change in
Control, a determination by Executive that any one or more of the following
events has occurred:
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(a) the assignment by the Company to Executive of duties that
are inconsistent with the Office at the time of such assignment, or
the removal by the Company from Executive of those duties usually
appertaining to the Office at the time of such removal; or
(b) a change by the Company, without Executive's prior
written consent, in Executive's responsibilities to the Company as
such responsibilities existed at the time of the occurrence of such
Change in Control (or as such responsibilities may thereafter exist
from time to time as a result of changes in such responsibilities made
with Executive's prior written consent); or
(c) any removal of Executive from, or any failure to elect or
reelect Executive to, the Office, except in connection with
Executive's promotion, with his prior written consent, to a higher
office (if any) with the Company; or
(d) the Company's direction that Executive discontinue
service (or not seek reelection or reappointment) as a director,
officer or member of any corporation or other entity of which
Executive is a director, officer or member at the time of the
occurrence of such Change in Control; or
(e) the failure of the Company to continue to provide
Executive with office space, related facilities and support personnel
(including but not limited to, administrative and secretarial
assistance) that are consistent with the terms of this Agreement and
that are both commensurate with the Office and Executive's
responsibilities to and position with the Company at the time of the
occurrence of such Change in Control and are not materially dissimilar
to the office space, related facilities and support personnel provided
to other key executive officers of the Company; or
(f) a reduction by the Company in the amount of Executive's
minimum salary specified in Section 2.1(a) (or as subsequently
increased) and as in effect at the time of the occurrence of such
Change in Control, or a failure of the Company to pay such minimum
annual salary to the Employee at the time and in the manner specified
in Section 2.1(a) of this Employment Agreement; or
(g) in the event of any increase, at any time after the
occurrence of such Change in Control, in the minimum annual salary or
salaries of one or more members of the Executive Group (as defined in
Section 4.7 hereof) (the members or members of the Executive Group
whose minimum annual salary or salaries are increased at such time
being hereinafter called the "Increased Executives"), the failure of
the Company simultaneously to increase Executive's minimum annual
salary, as Executive's minimum annual salary is in effect immediately
prior to giving effect to such first-mentioned increase (the "Prior
Base
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Salary"), by an amount which equals or exceeds the product obtained by
multiplying the Prior Base Salary by a fraction, the numerator of
which is the sum of the amounts by which the respective minimum annual
salaries of the Increased Executives (other than Executive) were
increased at such time and the denominator of which is the sum of the
respective minimum annual salaries of the Increased Executives (other
than Executive) immediately prior to giving effect to such
first-mentioned increase; or
(h) the discontinuation or reduction by the Company of
Executive's participation in any bonus or other employee benefit plan,
program, arrangement, or policy (including, but not limited to, any
such plan, program, arrangement, or policy described in Section 2.1(d)
hereof) in which Executive is a participant at the time of the
occurrence of such Change in Control; or
(i) Executive's principal office space or the related
facilities or support space or the related facilities or support
personnel referred to in paragraph (e) of this Section 4.5 cease to be
located within the Company's principal executive offices, or for a
period of more than 45 consecutive days Executive is required by the
Company to perform a majority of his duties outside the Company's
principal executive offices; or
(j) the relocation, without Executive's prior written
consent, of the Company's principal executive offices to a location
outside the county in which such offices are located at the time of
the occurrence of such Change in Control; or
(k) the failure of the Company to provide Executive annually
with a number of paid vacation days and sick leave days at lease equal
to the number of paid vacation days to which Executive is entitled
annually at the time of the occurrence of such Change in Control; or
(l) the failure of the Company to obtain the assumption by
any successor to the Company of the obligations imposed upon the
Company under this Agreement, as required by Section 5.2 of this
Agreement; or
(m) the failure by the Company to promptly reimburse
Executive for any Business Expenses; or
(n) that because of the policies, decisions or actions of the
Board or the stockholders of the Company, Executive can no longer
perform his duties to the Company in a manner which is consistent with
the manner in which such duties were performed by Executive prior to
the occurrence of such Change in Control; or
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(o) the employment of Executive under this Agreement is
terminated by the Company without Cause; or
(p) the Company notifies Executive of the Company's
intention not to observe or perform one or more of the obligations of
the Company under this Agreement; or
(q) the Company breaches any provision of this Agreement.
4.6 Change in Control. As used herein, the term "Change in Control"
shall mean the occurrence with respect to the Company of any of the following
events;
(a) a report on Schedule 13D is filed with the Securities and
Exchange Commission (the "SEC") pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act'),
disclosing that any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than the Company
(or one of its subsidiaries), any employee benefit plan sponsored by
the Company (or one of its subsidiaries) or Executive, is the
beneficial owner (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of 20 percent or more
of the outstanding shares of Common Stock or the combined voting power
of the then-outstanding securities of the Company;
(b) a report is filed by the Company disclosing a response to
either Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Exchange Act, or to Item 1 of Form 8-K promulgated under the
Exchange Act, or to any similar reporting requirement hereafter
promulgated by the SEC;
(c) any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than the Company
(or one of its subsidiaries), any employee benefit plan sponsored by
the Company (or one of its subsidiaries) or Executive, shall purchase
securities pursuant to a tender offer or exchange offer to acquire any
Common Stock (or securities convertible into Common Stock) for cash,
securities or any other consideration, provided that after
consummation of the offer, the person, entity or group in question is
the beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of 20
percent or more of the combined voting power of the then-outstanding
securities of the Company (as determined under paragraph (d) of Rule
13d-3 promulgated under the Exchange Act, in the case of rights to
acquire Common Stock);
(d) the stockholders of the Company shall approve:
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(i) any merger, consolidation, or reorganization of
the Company:
(A) in which the Company is not the
continuing or surviving corporation,
(B) pursuant to which shares of Common
Stock would be converted into cash, securities or
other property,
(C) with a corporation which prior to such
merger, consolidation, or reorganization owned 20
percent or more of the combined voting power of the
then-outstanding securities of the Company, or
(D) in which the Company will not survive
as an independent, publicly-owned corporation;
(ii) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of
all or substantially all the assets of the Company, or
(iii) any liquidation or dissolution of the Company;
(e) the stockholders of the Company shall approve a merger,
consolidation, reorganization, recapitalization, exchange offer,
purchase of assets or other transaction after the consummation of
which any person, entity or group (as defined in accordance with
Section 13(d) or 14(d) of the Exchange Act) would own beneficially in
excess of 50% of the outstanding shares of Common Stock or in excess
of 50% of the combined voting power of the then-outstanding securities
of the Company;
(f) the Common Stock ceases to be listed on any national
securities exchange upon which it has previously been listed;
(g) the occurrence of the distribution of any rights to the
stockholders of the Company pursuant to any stockholders' rights plan
that may be adopted by the Company in the future; or
(h) during any period of two consecutive years, the
individuals who at the beginning of such period constituted the Board
cease for any reason to constitute a majority of the Board, unless the
election or nomination for election by the Company's stockholders of
each new director during any such two-year period was approved by the
vote of two-thirds of the directors then still in office who were
directors at the beginning of such two-year period.
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4.7 Executive Group. As used herein, "Executive Group" shall mean the
officers of the Company; and each of such officers shall be deemed members of
the Executive Group.
4.8 Disabled. As used herein, "Disabled" shall mean a mental or
physical impairment which in the reasonable opinion of a qualified doctor
selected by the Company renders Executive unable to perform with reasonable
diligence the ordinary functions and duties of Executive on a full-time basis
in accordance with the terms of this Agreement, which inability will continue
in the reasonable opinion of such doctor for a period of not less than 180
days.
4.9 Return of Materials; Confidential Information. In the event of any
termintion of this Agreement, Executive shall promptly deliver to the Company
all lists, books, records, literature, products and any other materials owned
or provided by the Company in connection with Executive's employment hereunder.
Executive shall not at any time during or after the Term hereof use for himself
or others, or divulge to others, any secret or confidential information,
knowledge or data of the Company obtained by Executive as a result of his
employment unless authorized by a majority of the Board.
4.10 Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment
or distribution by the Company or any of its affiliates to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise
(any such payments or distributions being individually referred to
herein as a "Payment," and any two or more of such payments or
distributions being referred to herein as "Payments"), would be
subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") (such excise tax,
together with any interest thereon, any penalties, additions to tax,
or additional amounts with respect to such excise tax, and any
interest in respect of such penalties, additions to tax or additional
amounts, being collectively referred herein to as the "Excise Tax"),
then Executive shall be entitled to receive an additional payment or
payments (individually referred to herein as a "Gross-Up Payment" and
any two or more of such additional payments being referred to herein
as "Gross-Up Payments") in an amount such that after payment by
Executive of all taxes (as defined in Section 4.10(k) imposed upon the
Gross-Up Payment, Executive retains an amount of such Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 4.10(c) through (i),
any determination (individually, a "Determination") required to be
made under this Section 4.10(b), including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall initially
be made, at the Company's expense, by nationally recognized tax
counsel mutually
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acceptable to the Company and Executive ("Tax Counsel"). Tax Counsel
shall provide detailed supporting legal authorities, calculations, and
documentation both to the Company and Executive within 15 business
days of the termination of Executive's employment, if applicable, or
such other time or times as is reasonably requested by the Company or
Executive. If Tax Counsel makes the initial Determination that no
Excise Tax is payable by Executive with respect to a Payment or
Payments, it shall furnish Executive with an opinion reasonably
acceptable to Executive that no Excise Tax will be imposed with
respect to any such Payment or Payments. Executive shall have the
right to dispute any Determination (a "Dispute") within 15 business
days after delivery of Tax Counsel's opinion with respect to such
Determination. The Gross-Up Payments, if any, as determined pursuant
to such Determination shall, at the Company's expense, be paid by the
Company to Executive within five business days of Executive's receipt
of such Determination. The existence of a Dispute shall not in any way
affect Executive's right to receive the Gross-Up Payment in accordance
with such Determination. If there is no Dispute, such Determination
shall be binding, final and conclusive upon the Company and Executive,
subject in all respects, however, to the provisions of Section 4.10(c)
through (i) below. As a result of the uncertainty in the application
of Sections 4999 and 280G of the Code, it is possible that Gross-Up
Payments (or portions thereof) which will not have been made by the
Company should have been made ("Underpayment"), and if upon any
reasonable written request from Executive or the Company to Tax
Counsel, or upon Tax Counsel's own initiative, Tax Counsel, at the
Company's expense, thereafter determines that Executive is required to
make a payment of any Excise Tax or any additional Excise Tax, as the
case may be, Tax Counsel shall, at the Company's expense, determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to Executive.
(c) The Company shall defend, hold harmless, and indemnify
Executive on a fully grossed-up after tax basis from and against any
and all claims, losses, liabilities, obligations, damages,
impositions, assessments, demands, judgements, settlements, costs and
expenses (including reasonable attorneys', accountants', and experts'
fees and expenses) with respect to any tax liability of Executive
resulting from any Final Determination (as defined in Section 4.10(j))
that any Payment is subject to the Excise Tax.
(d) If a party hereto receives any written or oral
communication with respect to any question, adjustment, assessment or
pending or threatened audit, examination, investigation or
administrative, court or other proceeding which, if pursued
successfully, could result in or give rise to a claim by Executive
against the Company under this Section 4.10(d) ("Claim"), including,
but not limited to, a claim for indemnification of Executive by the
Company under Section 4.10(c), then such party shall promptly notify
the other party hereto in writing of such Claim ("Tax Claim Notice").
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(e) If a Claim is asserted against Executive ("Executive
Claim"), Executive shall take or cause to be taken such action in
connection with contesting such Executive Claim as the Company shall
reasonably request in writing from time to time, including the
retention of counsel and experts as are reasonably designated by the
Company (it being understood and agreed by the parties hereto that the
terms of any such retention shall expressly provide that the Company
shall be solely responsible for the payment of any and all fees and
disbursements of such counsel and any experts) and the execution of
powers of attorney, provided that:
(i) within 30 calendar days after the Company
receives or delivers, as the case may be, the Tax Claim
Notice relating to such Executive Claim (or such earlier date
that any payment of the taxes claimed is due from Executive,
but in no event sooner than five calendar days after the
Company receives or delivers such Tax Claim Notice), the
Company shall have notified Executive in writing ("Election
Notice") that the Company does not dispute its obligations
(including, but not limited to, its indemnity obligations)
under this Agreement and that the Company elects to contest,
and to control the defense or prosecution of, such Executive
Claim at the Company's sole risk and sole cost and expense;
and
(ii) the Company shall have advanced to Executive on
an interest-free basis, the total amount of the tax claimed
in order for Executive, at the Company's request, to pay or
cause to be paid the tax claimed, file a claim for refund of
such tax and, subject to the provisions of the last sentence
of Section 4.10(g), xxx for a refund of such tax if such
claim for refund is disallowed by the appropriate taxing
authority (it being understood and agreed by the parties
hereto that the Company shall only be entitled to xxx for a
refund and the Company shall not be entitled to initiate any
proceeding in, for example, United States Tax Court) and
shall indemnify and hold Executive harmless, on a fully
grossed-up after tax basis, from any tax imposed with respect
to such advance or with respect to any imputed income with
respect to such advance; and
(iii) the Company shall reimburse Executive for any
and all costs and expenses resulting from any such request by
the Company and shall indemnify and hold Executive harmless,
on fully grossed-up after-tax basis, from any tax imposed as
a result of such reimbursement.
(f) Subject to the provisions of Section 4.10(e) hereof, the
Company shall have the right to defend or prosecute, at the sole cost,
expense and risk of the Company, such Executive Claim by all
appropriate proceedings, which proceedings shall be defended or
prosecuted diligently by the Company to a Final Determination;
provided, however, that
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(i) the Company shall not, without Executive's prior written consent,
enter into any compromise or settlement of such Executive Claim that
would adversely affect Executive, (ii) any request from the Company to
Executive regarding any extension of the statute of limitations
relating to assessment, payment, or collection of taxes for the
taxable year of Executive with respect to which the contested issues
involved in, and amount of, the Executive Claim relate is limited
solely to such contested issues and amount, and (iii) the Company's
control of any contest or proceeding shall be limited to issues with
respect to the Executive Claim and Executive shall be entitled to
settle or contest, in his sole and absolute discretion, any other
issue raised by the Internal Revenue Service or any other taxing
authority. So long as the Company is diligently defending or
prosecuting such Executive Claim, Executive shall provide or cause to
be provided to the Company any information reasonably requested by the
Company that relates to such Executive Claim, and shall otherwise
cooperate with the Company and its representatives in good faith in
order to contest effectively such Executive Claim. The Company shall
keep Executive informed of all developments and events relating to any
such Executive Claim (including, without limitation, providing to
Executive copies of all written materials pertaining to any such
Executive Claim), and Executive or his authorized representatives
shall be entitled, at Executive's expense, to participate in all
conferences, meetings and proceedings relating to any such Executive
Claim.
(g) If, after actual receipt by Executive of an amount of a
tax claimed (pursuant to an Executive Claim) that has been advanced by
the Company pursuant to Section 4.10(e)(ii) hereof, the extent of the
liability of the Company hereunder with respect to such tax claimed
has been established by a Final Determination, Executive shall
promptly pay or cause to be paid to the Company any refund actually
received by, or actually credited to, Executive with respect to such
tax (together with any interest paid or credited thereon by the taxing
authority and any recovery of legal fees from such taxing authority
related thereto), except to the extent that any amounts are then due
and payable by the Company to Executive, whether under the provisions
of this Agreement or otherwise. If, after the receipt by Executive of
an amount advanced by the Company pursuant to Section 4.10(e)(ii), a
determination is made by the Internal Revenue Service or other
appropriate taxing authority that Executive shall not be entitled to
any refund with respect to such tax claimed and the Company does not
notify Executive in writing of its intent to contest such denial of
refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of any Gross-Up Payments and other
payments required to be paid hereunder.
(h) With respect to any Executive Claim, if the Company
fails to deliver an Election Notice to Executive within the period
provided in Section 4.10(e)(i) hereof or, after
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delivery of such Election Notice, the Company fails to comply with the
provisions of Sections 4.10(e)(ii) and (iii) and 4.10 (f) hereof, then
Executive shall at any time thereafter have the right (but not the
obligation), at his election and in his sole and absolute discretion,
to defend or prosecute, at the sole cost, expense and risk of the
Company, such Executive Claim. Executive shall have full control of
such defense or prosecution and such proceedings, including any
settlement or compromise thereof. If requested by Executive, the
Company shall cooperate, and shall cause its affiliates to cooperate,
in good faith with Executive and his authorized representatives in
order to contest effectively such Executive Claim. The Company may
attend, but not participate in or control, any defense, prosecution,
settlement or compromise of any Executive Claim controlled by
Executive pursuant to this Section 4.10(h) and shall bear its own
costs and expenses with respect thereto. In the case of any Executive
Claim that is defended or prosecuted by Executive, Executive shall,
from time to time, be entitled to current payment, on a fully
grossed-up after tax basis, from the Company with respect to costs and
expenses incurred by Executive in connection with such defense or
prosecution.
(i) In the case of any Executive Claim that is defended or
prosecuted to a Final Determination pursuant to the terms of this
Section 4.10(i), the Company shall pay, on a fully grossed-up after
tax basis, to Executive in immediately available funds the full amount
of any taxes arising or resulting from or incurred in connection with
such Executive Claim that have not theretofore been paid by the
Company to Executive, together with the costs and expenses, on a fully
grossed-up after tax basis, incurred in connection therewith that have
not theretofore been paid by the Company to Executive, within ten
calendar days after such Final Determination. In the case of any
Executive Claim not covered by the preceding sentence, the Company
shall pay, on a fully grossed-up after tax basis, to Executive in
immediately available funds the full amount of any taxes arising or
resulting from or incurred in connection with such Executive Claim at
least ten calendar days before the date payment of such taxes is due
from Executive, except where payment of such taxes is sooner required
under the provisions of this Section 4.10(i), in which case payment of
such taxes (and payment, on a fully grossed-up after tax basis, of any
costs and expenses required to be paid under this Section 4.10(i)
shall be made within the time and in the manner otherwise provided in
this Section 4.10(i).
(j) For purposes of this Agreement, the term "Final
Determination" shall mean (A) a decision, judgment, decree or other
order by a court or other tribunal with appropriate jurisdiction,
which has become final and non-appealable; (B) a final and binding
settlement or compromise with an administrative agency with
appropriate jurisdiction, including, but not limited to, a closing
agreement under Section 7121 of the Code; (C) any disallowance of a
claim for refund or credit in respect to an overpayment of tax unless
a suit is filed on a
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timely basis; or (D) any final disposition by reason of the expiration
of all applicable statutes of limitations.
(k) For purposes of this Agreement, the terms "tax" and
"taxes" mean any and all taxes of any kind whatsoever (including, but
not limited to, any and all Excise Taxes, income taxes, and employment
taxes), together with any interest thereon, any penalties, additions
to tax, or additional amounts with respect to such taxes and any
interest in respect of such penalties, additions to tax, or additional
amounts.
(l) For purposes of this Agreement, the terms "affiliate" and
"affiliates" mean, when used with respect to any entity, individual,
or other person, any other entity, individual, or other person which,
directly or indirectly, through one or more intermediaries controls,
or is controlled by, or is under common control with such entity,
individual or person. The term "control" and derivations thereof when
used in the immediately preceding sentence means the ownership,
directly or indirectly, of 50% or more of the voting securities of an
entity or other person or possessing the power to direct or cause the
direction of the management and policies of such entity or other
person, whether through the ownership of voting securities, by
contract or otherwise.
4.11 Legal Fees and Expenses. The Company shall defend, hold harmless,
and indemnify Executive on a fully grossed-up after tax basis from and against
any and all costs and expenses (including reasonable attorneys', accountants'
and experts' fees and expenses) incurred by Executive from time to time as a
result of any contest (regardless of the outcome) by the Company or others
contesting the validity or enforcement of, or liability under, any term or
provision of this Agreement, plus in each case interest at the applicable
federal rate provided for in Section 7872(f)(2)(B) of the Code.
4.12 Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit Executive's continuing or future participation in any benefit,
bonus, incentive or other plan, program, arrangement or policy provided by the
Company or any of its affiliates (including, but not limited to, any plan,
program, arrangement or policy described in Section 2.1(d) hereof) and for
which Executive and/or Executive's family may qualify, nor shall anything
herein limit or otherwise affect such rights as Executive and/or Executive's
family may have under any other agreements with the Company or any of its
affiliates. Amounts which are vested benefits or which Executive and/or
Executive's family is otherwise entitled to receive under any plan, program,
arrangement, or policy of the Company or any of its affiliates (including, but
not limited to, any plan, program, arrangement or policy described in Section
2.1(d) hereof) and for which Executive and/or Executive's family may qualify,
nor shall anything herein limit or otherwise affect such rights as Executive
and/or Executive's family may have under any other agreements with the Company
or any of its affiliates. Amounts which are vested benefits or which Executive
and/or Executive's family is otherwise
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entitled to receive under any plan, program, arrangement, or policy of the
Company or any of its affiliates (including, but not limited to, any plan,
program, arrangement or policy described in Section 2.1(d) hereof) at or
subsequent to the date of termination of this Agreement shall be payable in
accordance with such plan, program, arrangement or policy.
4.13 Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
Executive or others. In no event shall Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to Executive under any of the provisions of this Agreement.
ARTICLE V
GENERAL PROVISIONS
5.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
5.2 Assignability. This Agreement is personal to Executive and without
the prior written consent of the Company shall not be assignable by Executive
other than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by Executive's legal
representatives and heirs. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The Company shall
require any corporation, entity, individual or other person who is the
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization, or otherwise) to all or substantially all of the business or
assets of the Company to expressly assume and agree to perform, by a written
agreement in form and substance satisfactory to Executive, all of the
obligations of the Company under this Agreement. As used in this Agreement, the
term "Company" shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, written agreement, or otherwise.
5.3 Withholding. The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
5.4 Entire Agreement. This Agreement constitutes the entire agreement
and understanding between Executive and the Company and supersedes any prior
agreements or understandings, whether written or oral, with respect to the
subject matter hereof. Except as may be otherwise provided herein, this
Agreement may not be amended or modified except by subsequent written agreement
executed by both parties hereto.
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5.5 Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, but all of which
together shall constitute one Agreement.
5.6 Notices. Any notice provided for in this Agreement shall be deemed
delivered upon deposit in the United States mails, registered or certified
mail, addressed to the party to whom directed at the addresses set forth below
or at such other addresses as may be substituted therefor by notice given
hereunder. Notice given by any other means must be in writing and shall be
deemed delivered only upon actual receipt.
If to the Company:
1 + USA, inc.
0000 Xxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
If to Executive:
Xxx X. Xxxxxxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
5.7 Waiver. The waiver of any breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any breach of the
same or any other term or condition of this Agreement.
5.8 Severability. In the event any provision of this Agreement is
found to be unenforceable or invalid, such provision shall be severable from
this Agreement and shall not effect the enforceability or validity of any other
provision of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
1 + USA, INC.
BY:
------------------------------------
XXXXXX X. XXXXXXX
SENIOR VICE PRESIDENT AND CHIEF
OPERATING OFFICER
"COMPANY"
---------------------------------------
XXX X. XXXXXXXXX
"EXECUTIVE"
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